Dr Seamus Hegarty's name was included in court papers
The Catholic Church in Londonderry has said police were told about sex abuse claims against a priest at the centre of an alleged compensation cover-up.
The Bishop of Derry has been accused of being involved in a compensation deal to cover up alleged child sex abuse.
Dr Seamus Hegarty was one of three priests named in a confidential civil settlement after an eight-year-old girl was abused over a decade from 1979.
Spokesman Fr Michael Canny said police were told about the case in the 1990s.
The civil action was settled out of court in December 2000 and was signed by lawyers on behalf of Dr Hegarty, Bishop Edward Daly and the alleged abuser without admission of liability.
"At this early stage, from the indications from those trawling through the documents, I am of the mind that the police and social services are aware of these allegations from perhaps the mid-90s," Fr Canny, the diocesan spokesman, said.
"All allegations must be dealt with by the PSNI, in this jurisdiction, or the Garda Siochana in other jurisdiction or the social services and reported the minute, or as soon as possible, after they are notified to the bishop or to the priest."
The Belfast Telegraph reported £12,000 was paid to the alleged victim, subject to a confidentiality agreement.
Bishop Daly was named in the court papers, but at the time his duties were being carried out by another bishop due to illness.
Bishop Hegarty has yet to comment on the allegations.
Religious affairs presenter William Crawley
We are told, that the closest the priest in question came to an admission of guilt was a handwritten letter, attached to the civil agreement, in which he apologised to the alleged victim's family for "for any pain I caused you through inappropriate gesture or mistaken signs of affection".
If an alleged paedophile describes his actions as a "mistaken sign of affection", could that be a sign that they are still unwilling to fully accept the may have done wrong?
Read William Crawley's full piece here
There was a handwritten letter asking for "some forgiveness" from the alleged abuser in which he offered the family his "deepest apology for any pain I caused you through inappropriate gesture or mistaken signs of affection".
The girl's father said that they had not gone to the police because "it was not the culture" in Derry at the time to do so.
Ian Elliott, who is chief executive of the National Board for Safeguarding Children in the Catholic Church in Ireland, said that he did not know the details of the specific case but that out of court settlements were "not acceptable".
"If any situation comes to light involving a child then the policy of the church, and the absolute commitment that is given, is that that information will be conveyed to the appropriate state authorities, the PSNI and the social services," he said.
In 2005 Bishop Hegarty disclosed details of the extent of child sex abuse allegations against priests in his diocese, revealing that 26 had been accused in 40 years.
In a possible reference to the case reported on by the Belfast Telegraph the bishop said that one of the cases involved a priest making a personal settlement with a complainant, without admission of liability, and that the priest was not in active ministry.
It comes as the head of Ireland's Catholics apologised for
his role in mishandling a serial child abuser.
As a priest in 1975 Cardinal Sean Brady was at meetings where children signed vows of silence over complaints against paedophile priest Fr Brendan Smyth.
Smyth was eventually convicted of dozens of offences against children.
But despite allegations being previously investigated by church officials, including Cardinal Brady, it was almost 20 years before he was brought to justice.
He said he wanted to apologise to "all those who feel I have let them down".
On Wednesday Cardinal Brady said that for the sake of abuse survivors and the church "we have to stop the drip, drip, drip of revelations of failure".
Meanwhile, Pope Benedict XVI has announced that on Friday he will sign his long awaited pastoral letter dealing with paedophilia in Ireland.
He said in recent months the church in Ireland had been "rocked by the crisis of abuse of minors" and hoped his letter would "help repentance, healing and renewal".